Effect of generic drug competition on the price of prescription drugs in Ontario.

OBJECTIVE: To analyse the potential effect of generic drug competition on prices in Ontario to assess the costs and benefits associated with Bill C-22 (An Act to amend the Patent Act).

DESIGN: Comparison of the cost of the least and most expensive versions of all products sold by more than one manufacturer in 1991. The number of brand-name and generic drug companies marketing each of the products was recorded.

RESULTS: Of 1599 products 437 (27.3%) were made by more than one company. Almost half (44.6%) of the 437 were sold by two companies. The more companies that sold a drug the greater the difference in price between the least and most expensive versions. Similarly, as the proportion of generic drug companies in competition increased, the greater the price difference. When competition was between generic drug companies only, the price spread was smaller than when it was between brand-name drug companies only.

CONCLUSIONS: Generic drug competition can result in savings to the Ontario Drug Benefit Plan. A more in-depth analysis of the potential savings is necessary to fully assess the costs and benefits associated with Bill C-22.